Charitable giving by individuals in 2018 will decline by $16.3 billion because of the new tax law, according to a new analysis.
Published by conservative-leaning Washington think tank American Enterprise Institute and authored by Alex Brill and Derrick Choe, the analysis attributes four-fifths of the projected decline in giving to an increase in the number of taxpayers who will claim the standard deduction under the new tax law.
The $16.3 billion figure assumes modest economic growth. With no economic growth, the study predicts a $17.2 billion decline in giving, or 4 percent.
While the Tax Cuts and Jobs Act, signed into law in December by President Trump, affects nonprofits in a number of ways, the biggest is the near doubling of the standard deduction to $24,000 for married couples and $12,600 for single filers. It means that 27.3 million fewer taxpayers will likely itemize their deductions when filing their taxes, including the charitable deduction, according to the new AEI analysis.
The new report highlights two recent legislative proposals to restore charitable giving to earlier levels, at least. One bill, put forth by Rep. Mark Walker, a North Carolina Republican, and Sen. James Lankford, an Oklahoma Republican, would allow all taxpayers to take the charitable deduction, but with limits.
Another bill, introduced this spring by Rep. Chris Smith, a New Jersey Republican, would also create an “above-the-line” charitable deduction, but without a cap. Neither bill has gained serious momentum in Congress.
The new American Enterprise Institute study is not alone in its conclusions. Multiple tax-policy experts and academics have predicted that the Tax Cuts and Jobs Act will reduce charitable giving.
In November, the Tax Policy Center published a projection by Joseph Rosenberg and Philip Stallworth that estimated charitable giving could drop between $12.3 billion and $19.7 billion.
Also last year, a study by the Lilly Family School of Philanthropy at Indiana University estimated the doubling of the standard deduction would reduce charitable giving by $13.1 billion annually.
Human-service groups could be especially hard hit, according to one projection.
And there is already some early 2018 charitable-giving data backing up those predictions. The number of gifts in excess of $250 in the first three months of the year declined compared with the same time period in 2017, according to a report by the Fundraising Effectiveness Project.
